On Wednesday, Federal Communications Commission (FCC) Chairman Ajit Pai announced his plan to undo the 2015 reclassification of broadband internet access service, reverting internet access from a Title II telecommunications service to a Title I information service. Depending on how you count, this is the FCC’s third, fourth, or fifth attempt at establishing what authority it has over internet services; it is the second fundamental reclassification of its authority since the Supreme Court affirmed its decision not to treat internet access as a Title II telecommunications service in Brand-X.
Under the law that governs how federal agencies operate, agencies such as the FCC are largely free to swing back and forth between different policies, even fundamentally conflicting ones, as political winds shift. The previous commission’s rules were the most extreme of these swings to date, for the first time classifying internet access services generally as telecommunications services, subjecting them to blunt rules, and imposing vague conduct standards on the internet ecosystem as a whole — and they did so based on weak and controversial evidence. Chairman Pai’s proposal would return us to a more neutral baseline, erasing the most extreme elements of the prior rules but leaving in place a framework for basic “rules of the road.”
Needless to say, regularly rewriting the rules that govern one of the largest industries in the economy isn’t a good way to run an industry. Unfortunately, it’s not within the current commission’s power to adopt rules that will likely constrain a future commission. But by returning to a more neutral baseline approach to internet regulation, Chairman Pai is creating an opportunity for Congress or the courts to step in and put an end to the destructive, yet largely meaningless, generational fight over “net neutrality.”
Correcting the record
The previous iteration of the commission’s rules was adopted in February 2015 and was subsequently affirmed by the DC Circuit Court of Appeals in June 2016. The most notable aspect of these rules was that they reclassified broadband internet access service as a Title II telecommunications service. Under Title II, the FCC has very broad authority to regulate nearly every aspect of the telecommunications industry.
Reclassification marked a stark change from the policy of the previous several commissions. Since the late 1990s, the commission had steadfastly argued, under both Democratic and Republican leadership, that internet access should not be classified as a telecommunications service. Rather, the key question prior commissions focused on was whether they should rely on Title I’s “ancillary jurisdiction” doctrine or Section 706 of the Telecommunications Act to address network neutrality concerns. This question was rather definitively answered by the DC Circuit Court of Appeals in 2014 in an opinion that both indicated that the FCC could rely on its Section 706 authority and laid out a roadmap explaining how to do so in a legally satisfactory way.
The commission’s story changed in the 2015 rules. Suddenly Section 706 was no longer sufficient; suddenly the commission needed to implement stronger rules that could only be supported by reclassification. What had changed? As a matter both of fact and law, nothing. The only change was political: Advocates for expansive government regulation of the internet had seized on network neutrality as a good means to their preferred regulatory end and had organized a successful campaign to foment concern and cement support for their preferred policy.
Critically, making this change required the commission to find support for it in the factual record. This is where the magic of administrative process comes in: The factual record the commission compiled as part of the notice and comment process included myriad opinions, both supporting and criticizing its proposed rules. Developing “factual support” for its new policy required merely pointing supportive comments from the record — both to substantiate the commission’s preferred outcome and to respond to criticisms of it.
This process requires no analysis beyond saying “Commenters argued such and such. We agree.” Indeed, the FCC’s chief economist has publicly discussed (0) the lack of — and, indeed, improper use of —economic analysis to support the 2015 rules. I have written about this as well (1), discussing the commission’s mischaracterization of, and failure to respond to, critical comments that both I and others submitted. While one DC circuit judge criticized the commission for these problems, the court ultimately did what courts usually do: It deferred to the commission’s evaluation of the factual evidence.
Setting things straight
In the coming weeks, Chairman Pai’s proposal to “de-re-classify” internet access service is going to be characterized in dramatic terms. In reality, it is a very modest proposal: It would merely return the FCC’s approach to the internet to the status quo that has governed for 19 of the 21 years since the 1996 Telecommunications Act was enacted — an approach that has given us Google, Facebook, Netflix, Amazon, Etsy, Pinterest, TechPolicyDaily.com, Pets.com, Craigslist, and a million other internet services.
What is more, Chairman Pai’s efforts will certainly be successful. The factual record this time around will be roughly the same as it was in 2015. It will be just as easy for the new commission to stitch together a narrative of supporting facts as it was for the old commission. Indeed, it will be easier. The previous order had to contend with the overwhelming weight of substantive economic and technical research militates against the approach taken in 2015 and in support of the chairman’s proposed approach.
And the chairman has an ace in the hole: The central theory of the 2015 rules was that they would encourage capital investment by telecommunications companies. With two years of data in the record, that theory has been shown to be false. The most complete analysis to date shows that capital investment in the sector is down, both in absolute terms and as compared to the economy as a whole (2). While a two-year horizon is a short period for such studies, and such studies are always subject to important caveats and limitations, the fact that they tend to suggest that reclassification has hurt capital investment — and especially the fact that there are no compelling countervailing studies — presents exceptionally strong support for Chairman Pai’s proposal.
Getting things right
But classification is not the real fight. Net neutrality is a generational fight; it is a religious war. Indeed, it is better understood as a fight over competing views of regulatory power than as a fight about how ISPs handle the data traversing their networks. Classification is merely the shorthand terminology for regulatory worldview; control of the commission is a proxy war for dominance of regulatory worldview. Never mind that the commission is tasked with regulating one of the largest and most important industries in the United States.
The unfortunate reality is that the structure of the commission’s statute and the law governing how it interprets that statute all-but guarantees this proxy war will continue for the indefinite future. The facts are complex enough and the record well enough developed that whoever is in charge at the FCC will be able to find sufficient factual basis to support whatever rule matches the current political winds. So long as the FCC is governed by a statute that does not clearly articulate how the agency is to approach the internet, and so long as the courts take an overtly deferential approach to how the agency evaluates those facts, each successive administration will continue to use the commission to symbolize its particular regulatory religion.
There are no solutions to this problem from within the agency. Things can only be made right by Congress, by clarifying the commission’s statutory authority, or the courts, by reversing their own decades-long abdication of their role in saying what the law is.
The most important thing that Chairman Pai’s proposal does is to tidy up the net neutrality mess and deliver it to Congress. His proposal reverses the most extreme aspects of the 2015 rules — Title II reclassification in particular — and leaves the direction of substantive rules open. He has reestablished what has long been considered the neutral baseline of agency authority. Now it’s Congress’s turn.